Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations, which it believes are reasonable. However, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to several factors, including:
uncertainties relating to our ability to establish and operate our business and generate revenue;
uncertainties relating to general economic, political, and business conditions in China;
industry trends and changes in demand for our products and service；
uncertainties relating to customer plans and commitments and the timing of orders received from customers;
announcements or changes in our advertising model and related pricing policies or that of our competitors;
unanticipated delays in the development, market acceptance, or installation of our products and services;
changes in Chinese government regulations; and
availability, terms and deployment of capital, relationships with third-party equipment suppliers
Overview and Recent Developments
Datasea Inc. (“Datasea” or the “Company”, NASDAQ: DTSS) is a technology company incorporated under the laws of the State of Nevada on September 26, 2014, with subsidiaries and operating entities located in Delaware, USA, and China. Since its incorporation in 2014, Datasea has been committed to the exploration, application, and commercialization of cutting-edge technologies. As a global high-tech company spanning both the Chinese and U.S. markets, Datasea’s business focuses on two main segments: Acoustic High-Tech and AI Multimodal Digitalization. Through continuous R&D investment, product innovation, and industrial collaboration, the company has gradually built a complete “technology – product – market” closed-loop system, achieving large-scale application and rapid growth in several industries. As a global high-tech company with deep integration of acoustics and artificial intelligence as the technological foundation, Datasea advances its dual-business engines of “Acoustic High-Tech + AI Multimodal Digitalization” to drive cross-industry applications. As one of the global proponents and industrial promoters of the “acoustic effect” concept, the Company leverages acoustic technology to establish unique technological barriers in five key fields—industrial, agricultural, healthcare, medical, and IoT—achieving full-chain value conversion from technological R&D to industry applications. In the past fiscal years, as high-margin solutions from both segments have gradually scaled, Datasea has transitioned from “scale growth” to “quality ,” laying a solid foundation for long-term objectives and maximizing shareholder value.
The Company operates in two core business segments: Acoustic High-Tech and AI Multimodal Digitalization
In the Acoustic High-Tech field, the company focuses on the innovation of acoustic technology in multiple scenarios, with “non-hearable mechanical wave effects” as the R&D core. In the environmental domain, the company has launched a series of acoustic environmental products to meet the purification needs of public and household settings; in the health domain, it has launched a series of acoustic medical and healthcare products, breaking through in areas such as neuro-regulation and acupoint stimulation, extending acoustic applications from environmental assistance to precise health management and clinical intervention. In the industrial domain, the company explores the application of ultrasound in fields such as industrial precision processing, agricultural pest control, and agricultural product preservation, forming a cross-industry empowerment model of “acoustics + AI + vertical scenarios.”
In the AI Multimodal Digitalization field, the company positions itself as a core service provider for the digitalization of the Chinese industry. With its self-developed multimodal data processing platform, it achieves real-time collection, analysis, and generation of text, voice, image, video, and other data types. The company focuses on the efficient and accurate matching of community services and consumer needs, offering full-spectrum services from standardized platform services (such as intelligent marketing, business process automation) to customized system solutions (such as full-process digital management for beauty salons, rural revitalization agricultural management platforms), helping customers optimize costs and improve efficiency.
Substantially all business operations of the Company are in China and the United States, and the Company also continuing to expand its business operations in other countries. In China, the Company has established a research, production, and sales network through entities such as Shuhai Tianjin and Shuhai Beijing, focusing on application of Acoustic markets in healthcare, medical aesthetics, industrial, and agricultural sectors. In the United States, through its wholly owned subsidiary, Datasea Acoustics LLC, the Company is planning to promote the distribution of acoustic products and patent deployment and is working with U.S. partners to expand local channels. Together, these initiatives support the development of a global operational framework characterized by technical collaboration and complementary market access.
Datasea, through the collaboration of its “product-based business (acoustic hardware + solutions)” and “platform-based business (AI multimodal services),” not only strengthens its commercialization achievements in fields like environmental disinfection and health assistance but also makes breakthroughs in high-value fields such as neuro-regulation, brain-computer interfaces, and industrial digitalization. The company aims to become a new generation of technology enterprises based on acoustic technology and driven by AI, establishing a unique competitive advantage in the global wave of acoustic intelligence and digitalization.
Business Strategy
The Company will continue to promote interdisciplinary research between acoustic science and artificial intelligence, striving to maintain a global leading position in areas such as non-hearable mechanical wave effects, acoustic coupling, and AI multimodal algorithms. The company has partnered with top research institutions such as the Chinese Academy of Sciences and Tsinghua University to establish joint laboratories and industrial research projects, continuously pushing scientific breakthroughs to be applied in industries.
Datasea is committed to broadening the application of acoustic technologies such as ultrasound, infrasound, and Schumann resonance in various industries. Combining acoustic technology with artificial intelligence as a technological foundation, it integrates into different industries’ products and services, enhancing existing solutions and extending them into high-value applications, realizing the cross-industry empowerment model of “acoustics + AI + application scenarios.”
Beyond the existing applications such as acoustic sterilization and sleep assistance, the Company aims to implement “acoustics + neuro-regulation” to intervene precisely in the brain (brain-computer interface), heart, and foot acupoints (foot-computer interface), constructing a closed-loop system for “detection — analysis — diagnosis — real-time intervention” to meet the growing global demand for non-pharmacological, precise health interventions.
In Acoustic Agriculture , the Company will leverage ultrasound to extend the shelf life of agricultural products, reduce pesticide use, and improve crop yield and quality.
In Acoustic Industrial Applications , the Company is developing ultrasound-assisted separation devices and 3D printing technologies to upgrade manufacturing processes.
In the IoT (Internet of Things) field, based on both acoustic high-tech and AI multimodal technologies, Datasea will tap into smart cities and consumer scenarios.
Overall Fiscal Year Performance
For the fiscal year ended June 30, 2025, the Company had revenue of $71,616,820, compared to $23,975,867 in fiscal year 2024, representing an increase of $47,640,953, or 198.70% compared to the same period in 2024.
This revenue growth is primarily due to the rapid expansion of our 5G AI multimodal communication business in China, with the company’s 5G AI digital business maintaining a leading position in the industry. Our growing customer base continues to support substantial business growth.
As of June 30, 2025, the Company recorded $2,443,948 in gross profit, an increase of $1,969,843, or 415.49%, compared to the same period of the prior year.
In the AI Multimodal Digitalization Business segment, the Company generated revenue of $70.68 million, compared to $23.60 million last year, an increase of 199.49%, which was due to rapid expansion of core clients. During fiscal year ended June 30, 2025, the 5G+AI multimodal digitalization business demonstrated robust growth momentum., by advancing both platform-based and customized services, which increased the Company’s revenue in this business segments, as well as its customer base.
In the acoustic technology business segment, the Company generated revenue of RMB 3,773,584.91 (approximately $527,110) from comprehensive acoustic technology solutions due to increase in deployment of beauty and health salons, by increasing the number of core clients, and establishing an offline network for showcasing and selling acoustic products.
During the fiscal year 2025, the Company significantly optimized its customer structure:
The number of AI multimodal clients increased from 8 to 15, with leading clients such as Qingdao Ruizhi Yixing, Wuhan Xiaoming Technology, and Xinyi Xinfanfa each contributing revenue exceeding $10 million, demonstrating strong customer stickiness and deepened cooperation.
More than 200 new SME clients were added, building a foundation for scalable growth.
In the acoustic business, deployment across 463 beauty and health salons enabled deep offline scenario penetration, while online live-streaming e-commerce channels complemented distribution, creating a B2B + B2C integrated sales network.
The multi-layered structure (leading clients driving growth, SME expansion, and end-user channel empowerment) enables the Company to achieve breakthroughs across different market levels simultaneously.
During the fiscal year 2025, Datasea expanded its acoustic business through both online and offline channels while optimizing its customer base across B2B and B2C markets :
The Company signed agreements with 14 beauty service companies in Tianjin, Beijing, and other cities, deploying products into 463 beauty and personal care salons across Northern China. This strengthened market penetration and solidified leadership in beauty and health management. As of June 2025, the Company’s network in Northern China covered 463 beauty and health salons, serving as product display and sales hubs, while also preparing the ground for future deployment of AI multimodal systems such as store management solutions. Through e-commerce platforms such as Douyin and Xiaohongshu, Datasea’s products began reaching personal consumers. The “Star Dream” sleep aid device, in particular, received strong consumer feedback and gained rapid traction through online live-streaming sales.
This diversified customer structure enables strong business momentum across industries and market segments, enhancing resilience and sustaining competitiveness.
Datasea leverages its dual business engines of Acoustic High-Tech and AI Multimodal Digitalization to continuously enhance its core technological strengths and adaptability across industries. In the acoustic field, the Company advances research and application of non-audible mechanical wave effects, exploring commercialization in areas such as healthcare and medical neuro-regulation, acupoint stimulation, industrial precision processing and liquid-phase separation, and agricultural preservation and pest control. In the AI multimodal field, the Company optimizes algorithm architectures and expands platform functions to process multimodal data across speech, image, text, and video, enabling applications in healthcare, enterprise services, and consumer markets.
By combining the cross-scenario expansion of acoustic technologies with the industry-specific applications of its AI platform, Datasea delivers a mix of standardized tools and customized solutions, balancing scalability with differentiation and ensuring stable, efficient performance across complex business environments.
Market Expansion and Future Potential
Growth in the domestic market has provided a strong foundation of technology validation and customer adoption, supporting further expansion. Looking ahead, Datasea intends to leverage its dual operational bases in China and the United States to pursue international opportunities. In China, the Company will continue to strengthen its presence in acoustic applications across healthcare, beauty, agriculture, and industrial sectors, while expanding AI multimodal services to support the digital transformation of SMEs. In the United States, through its wholly owned subsidiary Datasea Acoustics LLC, the Company is advancing the commercialization of acoustic products and patent cooperation, supported by partnerships with local distributors and technology collaborators.
The Company’s strategic objective is to establish differentiated advantages in both acoustic and digitalization technologies through continuous innovation and high-efficiency solutions, and in the medium to long term, to achieve cross-industry, multi-scenario global applications, building a sustainable path of steady growth.
Development Strategy
Datasea Inc.’s overall development strategy is based on “Acoustic High-Tech” and “AI Multimodal Digitalization” as its dual core engines. With the five major acoustic application areas (Acoustic Industry, Acoustic Agriculture, Acoustic Healthcare, Acoustic Medical and Elderly Care, Acoustic IoT) as the technological foundation, and four major product clusters (Acoustic Environmental Products, Acoustic Intelligent Manufacturing Products, Acoustic Wellness Products, Acoustic Medical Products) as business pillars, the Company is constructing a vertically integrated strategy system from technology R&D to industrial implementation. The Company relies on the dual operational platforms in the U.S. and China (the U.S. parent company oversees capital and strategy, while the China WFOE+VIE structure handles R&D and production), and through continuous high-intensity R&D investment, clear product roadmap planning, diversified market channel expansion, and proactive global intellectual property layout, the company is driving its business from “scale expansion” to “high-quality growth.” Our ultimate goal is to become a globally influential leader in the field of acoustic intelligence and digital solutions, creating sustainable value for shareholders, customers, and society through innovative “Acoustic + AI” technology product combinations.
Acoustic High-Tech Strategy
The acoustic high-tech strategy focuses on the “non-hearable mechanical wave effect,” deeply engaging in the R&D and commercialization of ultrasound, infrasound, and Schumann resonance technologies. The strategy aims to achieve multidimensional market expansion through the “four major product clusters.” The implementation path is as follows:
Core Technology Focus and Productization Path :
Environmental Product Cluster Scaling : Based on the “Datasea Tian Ear” disinfection series, the company uses both offline beauty salons (463 locations) and online live-streaming e-commerce channels to drive market penetration. The company also develops smart environmental monitoring and purification systems based on Acoustic IoT technology, strengthening its core revenue base.
Intelligent Manufacturing Product Breakthrough: The Company is focusing on advancing ultrasonic precision machining equipment (e.g., 3D metal printing) in the acoustic industry and ultrasonic pest control and crop growth promotion devices in the acoustic agriculture sector. The company is forming industry alliances with industrial groups and agricultural research institutions to create benchmark industry cases.
Wellness Product Ecosystem : Focusing on neuro-regulation (brain-computer interfaces) and foot health interventions, the company is building a “hardware + AI algorithm + health platform” closed-loop system. Through a B2B2C model, the company is cooperating with health management organizations and insurance companies to provide personalized health management services.
Acoustic Medical Product Frontier Layout: The Company is continually investing in the R&D of advanced technologies like Low-Intensity Focused Ultrasound (LIFU) and establishing clinical collaborations, reserving technologies and patents for future entry into the high-end medical device field.
AI Digital Platform Strategy
The AI digital platform strategy is built on multimodal intelligent technologies as the foundation, with industry deep empowerment at its core. The company is developing a “platform + solutions + ecosystem cooperation” three-in-one business model to provide strong digital support and collaborative value for the acoustic high-tech strategy.
Platform Service Strategy :
Based on the self-developed Transformer-based multimodal platform, the company continues to enhance its capabilities in integrating and generating text, speech, image, and video data. By offering standardized API interfaces and modular services, the company provides rapidly integrable AI capabilities to clients in industries such as finance, logistics, healthcare, and entertainment. The platform uses a subscription-based (SaaS) and pay-per-use model to ensure continuous revenue and scalability.
Industry Deep Solutions Strategy :
Focusing on high-growth scenarios, the company offers customized solutions:
SME Digital Solutions : Integrating membership management, intelligent marketing, and other functions to lower the digitalization threshold for SMEs.
Digital Rural Solutions : Providing smart agriculture management, rural logistics dispatch, and remote public services, supporting national rural revitalization policies.
Beauty and Health Industry Digital Solutions : Offering full-process digital management systems for offline beauty salons, creating synergies with the acoustic hardware business.
New Media Marketing Solution: Provides functions such as content generation and management, advertising placement and monitoring, and user engagement and interaction. This solution helps clients achieve precise marketing campaigns and brand promotion, empowering enterprises to digitally transform their presence on emerging platforms such as Douyin and Xiaohongshu.
Technology R&D Strategy
The company’s technology R&D strategy adheres to the principle of “balancing independent R&D and open cooperation,” driving forward through both frontier technology exploration and industrial application. The goal is to build an R&D system with continuous innovation capabilities.
R&D Focus Areas :
Acoustic Technology R&D : Focus on non-hearable sound applications, including acoustic neuro-regulation technology (low-intensity focused ultrasound + functional ultrasound imaging), brain-computer interface integration, and the application of acoustics in precision industrial processing and agricultural pest control. The company is establishing a complete R&D chain of “fundamental theoretical research — core technology breakthroughs — product development.”
AI Multimodal R&D : Continuously optimize cross-modal semantic calibration algorithms and develop scenario-specific modules for particular industries (e.g., beauty salon digital systems, new media marketing solution). Strengthen the data interactivity between AI multimodal platforms and acoustic hardware to achieve intelligent analysis and feedback adjustment of data collected by acoustic devices.
R&D System Construction :
The company has established a three-tier R&D system:
Frontier Technology Research Institute : Focused on 3-5 years of long-term technology development.
Product R&D Center : Responsible for 1-2 years of product development.
Customer Solutions Department : Focused on quick responses and customized development for customer needs.
Through an R&D management process of “project initiation — milestone monitoring — evaluation,” the company ensures effective resource allocation and project progress.
Industry-University-Research Collaborative Innovation : The Company has established joint laboratories with institutions such as Institute of Acoustics, Chinese Academy of Sciences , Internet Industry Research Institute, Tsinghua University , and Artificial Intelligence Research Institute, Harbin Institute of Technology , driving the rapid transformation of cutting-edge technologies through industrial research projects. The company actively participates in industry standard formulation and co-published the Acoustic High-Tech Industry White Paper ,
M&A Strategy
The company’s M&A strategy focuses on “technology enhancement, market synergy, and ecosystem improvement,” aiming to accelerate technological breakthroughs and market expansion through strategic acquisitions, achieving exterior growth .
Domestic Acquisitions :
The Company focuses on three major directions with high synergy to its core business:
Acoustic Technology Companies: The Company prioritizes acquiring innovative companies that possess core acoustic modules, sensor technologies, or patent portfolios to enhance its technological capabilities in the acoustic hardware field.
Artificial Intelligence and Big Data Companies: The Company targets teams with algorithm advantages or industry-specific data resources, strengthening the professional capabilities of its AI multimodal platform.
Industry Application Companies : The Company focuses on companies with mature customer resources and experience in industries such as smart agriculture and precision manufacturing, accelerating the commercialization of products in the acoustic industry and acoustic agriculture segments.
M&A standards emphasize technological synergy and the feasibility of team integration. The Company adopts a “cooperation first, acquisition later” strategy, deepening relationships through project collaboration and equity investment before proceeding with acquisitions, ensuring smooth integration of technologies and team stability post-acquisition.
International Acquisitions :
Focusing on the North American market , the Company conducts acquisitions along two main lines:
Technology-Oriented Acquisitions: The Company targets innovative enterprises with patents and technologies related to ultrasound neuro-regulation and brain-computer interfaces, rapidly acquiring cutting-edge technologies and intellectual property assets.
Market-Oriented Cooperation and Acquisitions: The Company forms deep partnerships with local distributors and manufacturers in the U.S., establishing localized sales networks and production capabilities through equity investment or acquisitions, thereby reducing cross-border operational costs.
International acquisitions emphasize compliance risk assessments and cross-cultural integration. The Company works with professional institutions to conduct due diligence, develops detailed post-merger integration plans, and ensures alignment with the company’s global strategy.
International Strategy
The international strategy follows a path of “gradual progress, key breakthroughs, and localized operations”, starting with the North American market and gradually building a global business presence and market influence.
Phased Market Expansion Strategy :
Phase 1 : Focus on developing the U.S. market by establishing a localized operational system through its US subsidiary, Datasea Acoustics LLC. The Company will initially introduce acoustic environmental products (disinfection and purification devices) and acoustic medical and elderly care products (sleep aid devices) as its flagship products and to partner with local distributors like iPower Inc.
Phase 2 : Expand into the European market, focusing on promoting acoustic medical and intelligent manufacturing products. Through collaborations with local research institutions and channel partners, the company will achieve product localization certification and market access.
Phase 3 : Gradually expand to Asia-Pacific and other emerging markets, forming a global sales network and service system.
Localized Operational System Construction :
The Company will establish localized teams in key overseas markets responsible for market promotion, customer service, and channel management. It will actively explore cooperation opportunities with local manufacturers, achieving product localization through technology licensing or cooperative manufacturing, thereby reducing tariffs and logistics costs, and enhancing market responsiveness. Additionally, the Company will establish product customization and capability output mechanisms to ensure its products and services meet local regulations and cultural preferences.
Global Resource Integration :
The Company will establish a global R&D collaboration network, building relationships with top overseas research institutions and attracting international talent to achieve global distribution of technological resources. At the same time, the company will participate in international industry exhibitions and standard-setting activities to enhance its brand influence and voice in the global acoustic intelligence sector.
Recent Developments
During the fiscal year ended June 30, 2025, the Company and its subsidiaries entered into the following material agreements with its key customers:
On August 12, 2024, Datasea Information Technology Co., Ltd. (“Shuhai Beijing”), Heilongjiang Xunrui Technology Co., Ltd. (“Xunrui Technology”), Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. (“Datasea Jingwei”), Guozhong Haoze (Beijing) Technology Co., Ltd. (“Guozhong Haoze”), and Guozhong Times (Beijing) Technology Co., Ltd. (“Guozhong Times”) entered into an agreement with Qingdao Ruizhi Yixing Information Technology Co., Ltd. (“Ruizhi Yixing”). The agreement stipulates the purchase of 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83) over a 12-month period from the effective date of the agreement. From July 1, 2024, to June 30, 2025, revenue from Ruizhi Yixing reached RMB 392,182,085.13 (equivalent USD 54,775,147).
On August 9, 2024, Shuhai Beijing signed an agreement with Shanghai Shixun Network Technology Co., Ltd. (“Shixun Network”), under which, for a 12-month period from the effective date, Shixun Network will purchase 5G+AI multimodal data cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). Between July 1, 2024, and June 30, 2025, revenue from Shixun Network reached RMB 10,981,054.18 (equivalent USD 1,533,698).
From August 9, 2024, to October 18, 2024, Shuhai Beijing, Heilongjiang Xunrui, and Guozhong Times signed an agreement with Wuhan Xiaoming Technology Co., Ltd. (“Xiaoming Technology”). Under these agreement, over a 12-month period from its effective date, Xiaoming Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024 to June 30, 2025, revenue from Xiaoming Technology reached RMB 25,000,429.43 ( equivalent USD 3,491,751).
From August 8, 2024, to February 13, 2025, Guozhong Times , Guozhong Haoze and Shuhai Beijing entered into an agreement with Xinyi Xinfanfa Information Technology Co., Ltd. (“Xinfanfa Technology”), under which, over a 12-month period from the effective date, Xinfanfa Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024, to June 30, 2025, revenue from Xinfanfa Technology reached RMB 41,736,607.01 (equivalent USD 5,829,253).
From October 8, 2024, to November 11, 2024, Shuhai Beijing, Guozhong Haoze, and Guozhong Times signed an agreement with Jiajie Technology Co., Ltd. (“Jiajie”), under which, over a 12-month period from the effective date, Jiajie will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024, to June 30, 2025, revenue from Jiajie reached RMB 23,843,624.39 (equivalent USD 3,330,183).
On Septembert 18, 2024, Guozhong Haoze signed an agreement with Wuhan Xinze Shixiang Technology Co., Ltd. (“Xinze Shixiang”), under which, for a 12-month period from the effective date, Xinze Shixiang will purchase 5G+AI multimodal data cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024 to June 30, 2025, revenue from Xinze Shixiang reached RMB 2,810,454.20 (equivalent USD392,530).
On August 12, 2024, Datasea Information Technology Co., Ltd. (“Shuhai Beijing”), Heilongjiang Xunrui Technology Co., Ltd. (“Xunrui Technology”), Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. (“Datasea Jingwei”), Guozhong Haoze (Beijing) Technology Co., Ltd. (“Guozhong Haoze”), and Guozhong Times (Beijing) Technology Co., Ltd. (“Guozhong Times”) entered into an agreement with Qingdao Dong’an Information Technology Co., Ltd. (“Qingdao Dong’an”). The agreement stipulates the purchase of 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83) over a 12-month period from the effective date of the agreement. From July 1, 2024, to June 30, 2025, revenue from Qingdao Dong’an reached RMB 614,663.73 (equivalent USD 85,849).
On November 1, 2024, Guozhong Haoze signed an agreement with Nanjing Linghui Information Engineering Co., Ltd. (“Linghui Information”), under which, upon the agreement’s effective date, two software copyrights were purchased for a total price of RMB 2,333,451.32. As of June 30, 2025, revenue from Linghui Information reached RMB 2,333,451 (equivalent USD 325,908).
On October 8, 2024, Shuhai Beijing signed an agreement with Anhui Gu Kai Business Co., Ltd.(“Anhui Gu Kai”), The agreement stipulates that within 50 days after the agreement takes effect, Shuhai Beijing will provide Anhui Gu Kai with a 5G-AI multi-modal small and medium-sized enterprise service platform technology solution. As of June 30, 2025, revenue from Anhui Gu Kai reached RMB 1,415,094.34 (equivalent USD197,666).
On December 25, 2024, the Company’s wholly owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Shuhai Jingwei”), signed an agreement with Tianjin Qianli Cultural Media Co., Ltd. (“Qianli Cultural Media”) to sale air purifiers (Hailijia). As of June 30, 2025, the revenue from Qianli Cultural Media reached RMB 267,936 (approximately USD 37,422). The signing and execution of this contract marks a strong start for the entry of acoustic environmental disinfection products into the end-consumer market, laying a solid foundation for the future expansion of the business and the brand’s influence.
In December 2024, the Company’s VIE entity subsidiary, Guozhong Haoze, signed an agreement with 14 beauty industry service companies in Tianjin, Beijing, and other cities in China, to deploy its acoustic high-tech products to 263 beauty and body care stores in northern China, including Tianjin and Hebei Province. According to the agreement, the Company plans to sell approximately 140,000 units of acoustic air purifiers, sleep products, and 5G AI digital service systems specifically developed for the beauty industry by the end of 2025, with expected revenue of USD 11 million (approximately RMB 77 million). This agreement not only expands Datasea’s market share in the beauty industry but also strengthens its penetration in northern China, further driving the industrial application of the Company’s products and technologies.
In January 2025, an additional agreement was signed with 9 health management companies in Tianjin, further expanding its business coverage in northern China. According to these agreements, Datasea’s acoustic high-tech products will be introduced into 200 beauty stores in key northern markets such as Tianjin and Hebei Province. By the end of 2025, approximately 90,000 units are expected to be sold, generating additional revenue of around USD 6.8 million. The signing of these new agreement further consolidates Datasea’s market leadership in health management and beauty sectors, creating more opportunities for long-term growth and market expansion in the future.
On February 20, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that within 30 days after the agreement takes effect, Shuhai Beijing will provide Beijing Meimei with a 5G-AI multi-modal small and medium-sized enterprise service platform technology solution. As of March 31, 2025, revenue from Beijing Meimei reached RMB 1,509,433.96 (equivalent USD 210,844).
On March 4, 2025, the Company’s wholly owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Shuhai Jingwei”), signed an agreement with Tianjin Zhongzhi Times Technology Development Co., Ltd. (“Zhongzhi Times”) to acoustic high-tech products.
On May 15, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that within 35 days after the agreement takes effect, Shuhai Beijing will provide 5G-AI multi-modal digital rural service platform technology solutions for Beijing Meimei. As of June 30, 2025, revenue from Beijing Meimei reached RMB 1,886,792.45 (equivalent USD263,555).
On May 16, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that Shuhai Beijing will provide specialized services for Beijing Meimei, including customized technical solutions for a new media marketing platform. As of June 30, 2025, revenue from Beijing Meime reached RMB 1,981,132.08 (equivalent USD276,733).
On May 20, 2025, Shuhai Jingwei (Shenzhen) Technology Co., Ltd. signed a contract with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd.（“Yuxiang Zhiyang”, based on the product concept and application scenarios proposed by Yuxiang Zhiyang, focusing on the combined principle of ultrasonic cavitation and ozone oxidation. Design a complete core technical solution for the “Bathroom Ultrasonic Sterilization and Odor Removal Treasure” product and issue a report. The contract amount (including tax) is RMB 1,800,000.00 (equivalent to US $251,431.76). As of June 30, 2025, Shuhai Jingwei has achieved revenue (excluding tax) of RMB 1,698,113.21 (equivalent to US $237,199.78).
On May 20, 2025, Shuhai Jingwei (Shenzhen) Technology Co., Ltd. signed a contract with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd.（“Yuxiang Zhiyang”), based on the product demand concept proposed by Yuxiang Zhiyang, focusing on the principle of sound wave and Schumann wave resonance for sleep assistance. Provide a complete set of technical solutions for the core technical architecture, key module design, functional logic description, system integration logic, and software and hardware interface definition of the “Sleep Treasure” product, and issue a report. The contract amount (including tax) is RMB 2,200,000.00 (equivalent to US $307,305.49). As of June 30, 2025, Shuhai Jingwei achieved revenue (excluding tax) of RMB 2,075,471.70 (equivalent to US $289,910.84).
On May 22, 2025, Shuhai Beijing signed an agreement with Tianjin Qianli Culture Media Co., Ltd.(“Qianli Cultural Media”), The agreement stipulates that Shuhai Beijing will provide specialized services for Qianli Cultural Media, including customized technical solutions for a new media marketing platform. As of June 30, 2025, revenue from Qianli Cultural Media reached RMB 2,075,471.70 (equivalent USD 289,910).
During the reporting period, the Company’s primary revenue was derived from service fees associated with 5G+AI multimodal digital business services. From July 1, 2024 to June 30, 2025, the revenue reached USD69.44 million, an increase of USD49.89 million compared with USD19.55 million in the same period of 2024, with a growth rate of 255.20%. This revenue growth is mainly attributable to the rapid expansion of China’s 5G+AI multimodal digital business, which has maintained a leading position within the industry. The continuously growing customer base has further supported the Company’s significant business expansion.
The technical solutions such as AI multi-modal services for small, medium and micro enterprises, AI multi-modal digital rural services, and AI multi-modal new media marketing services have all achieved revenue realization, totaling RMB8.9 million (Approximately USD1.24 million) indicating the full implementation and blooming of the company’s 5G AI multi-modal digital business. At the same time, the high-margin attribute of the technical solutions has lifted and improved the overall gross profit margin level.
ESG Management (2025)
Datasea remains committed to integrating ESG (Environmental, Social, and Governance) principles into its operations and long-term strategy, positioning ESG as a key engine for sustainable development. We recognize that ESG is not only an important tool for risk management and opportunity identification but also a pathway to strengthening resilience, enhancing competitiveness, and building long-term, positive relationships with stakeholders.
Green Supply Chain Management : In 2025, the Company worked closely with core suppliers to establish green production standards. By introducing energy-saving equipment across supplier networks, energy consumption per production line decreased by more than 10%, saving tens of thousands of kWh annually. A full lifecycle management system was also established, increasing the compliant disposal rate of waste by 20%.
Green Office and Energy-Saving Practices : The Shenzhen subsidiary continued upgrading its green office initiatives, adding a smart waste-sorting system. With special recycling for biodegradable waste, sorting accuracy for recyclables improved to over 90%. Paperless workflows reduced quarterly paper usage by 50% year-over-year, while office energy consumption per unit area fell by 15%.
ESG Data Transparency : The Company launched an ESG data transparency platform with a new supply chain carbon footprint tracking module. Most Tier-1 suppliers have achieved real-time data integration, laying the foundation for building supplier carbon accounts in the future.
Social
Employee Development and Diversity : ESG training coverage rose to 85% in fiscal year 2025, up 10 percentage points from the previous quarter. Adoption of internal green proposals increased by 35%. The Company launched an internal “ESG Action Points Program” , with over 90% employee participation, collectively logging more than 12,000 kilometers of green commuting.
Public Welfare and Community Engagement : The Company continued initiatives such as “Love Education” and the “Sunshine Volunteer Charity Club.” CEO Ms. Zhixin Liu, serving as a council member of the National Association of Women Entrepreneurs , actively promoted female entrepreneurship and philanthropic collaboration.
International Talent and Inclusion : The proportion of female employees continued to rise, with women holding 40% of management positions, reflecting the Company’s strong commitment to diversity, equality, and inclusion.
Going Concern
The accompanying consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. For the years ending June 30, 2025 and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025 and 2024, respectively.
The historical operating results indicate the Company has recurring losses from operations which raise the question related to the Company’s ability to continue as a going concern although the range of such recurring operating losses has narrowed in recent years. There can be no assurance the Company will become profitable or obtain necessary financing for its business and investments or that it will be able to continue in business and investments. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. As of June 30, 2025, the Company had cash of $620,807.
We will continue to bring in additional investors to support the Company’s research and development, marketing and operations.
Use multiple marketing channels to attract customers, enhance brand awareness and increase sales. By optimizing and integrating multiple marketing channels, it can cover a wider range of target customer groups, improve efficiency and effectiveness, meet customer needs, reduce risks, achieve multi-channel comprehensive coverage, and achieve success in market competition.
Strengthen brand image building, design a unique brand identity, unify the brand image, strengthen word-of-mouth marketing, use social media and word-of-mouth network, increase the authority and visibility of the brand, and continue to follow up and maintain the brand image, improve product strength and creativity.
Maintain enterprise competitiveness and achieve sustainable development. Strengthen research and development investment and in-depth understanding of market needs, establish an innovation culture, encourage employees to propose new ideas and creativity, and create an open innovation atmosphere. Reward and recognize the innovation results to stimulate the innovation enthusiasm of employees. Strengthen cooperation and exchanges, establish cooperative relations with universities and scientific research institutions, and jointly carry out research and development projects.
Participate in industry exhibitions, seminars and other activities to exchange experience with peers and obtain the latest technology and information. Optimize product development process, adopt agile development, lean production and other methods to improve product development efficiency and quality. We will pay attention to the protection of intellectual property rights, apply for patents, trademarks and other intellectual property rights in a timely manner, and protect innovation achievements.
If deemed necessary, management could seek to raise additional funds by the way of introducing strategic investors or private or public offerings, or by obtaining loans from banks or others, to support the Company’s research and development, procurement, marketing and daily operation. However, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. We may be required to pursue sources of additional capital through various means, including debt or equity financings.
Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in the future capital transactions may be more favorable for new investors. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
Sustainable operation can help enterprises improve operating efficiency, enhance the competitiveness of enterprises, and enhance the market share of enterprises.
Sustainable operation can help enterprises better control risks, reduce operating costs, and ensure the safety of enterprises.
Sustainable operation can help enterprises better grasp market opportunities, grasp market trends, and achieve a win-win situation between enterprises and society.
Significant Accounting Policies
Please refer to our significant accounting policies in Note 2 to our consolidated financial statements included in this report.
Results of Operations
Comparison of the years ended June 30, 2025, and 2024
The following table sets forth the results of our operations for the years ended June 30, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.
Revenues
Revenues
Revenues
Cost of revenues
Gross profit
Selling expenses
Research and development
General and administrative expenses
Total operating expenses
Loss from operations
Non-operating income (expenses), net
Loss before income taxes
Income tax expense
Loss before noncontrolling interest from continuing operation
Income before noncontrolling interest from discontinued operation
Less: loss attributable to noncontrolling interest from continuing operation
Net loss to the Company from continuing operation
Net income (loss) to the Company from discontinued operation
Net loss to the Company
Revenues
We had revenues of $71,616,820 and $23,975,867 for the years ended June 30, 2025, and 2024, respectively, which shows a $47,640,953 or 198.7% increase as compared with the same period of 2024. The increase in revenues was mainly due to the rapid increase of 5G AI multimodal digital business in China. For the year ended June 30, 2025, revenues mainly consisted of service fees from our 5G AI Multimodal digital. The Company’s 5G AI multimodal digital business is an industry leader, and the continued expansion of the Company’s customer base supports the continued significant improvement of the business.
From July 1, 2024 to June 30, 2025, the Company generated revenue of $71,616,820, including $70,682,408 from the 5G AI multimodal digital business, $584,788 from acoustic intelligence business, $325,908 from software sales and $23,716 from others. From July 1, 2023 to June 30, 2024, the Company generated revenue of $23,975,867, including $23,971,879 from the 5G AI multimodal digital business, $3,988 from Acoustic Intelligence Business..
This is inseparable from the Company’s research and development support and personnel support over the years, the Company’s upstream and downstream chain maintenance and experience accumulation and precipitation eventually formed a huge loyal customer base, but also closely related to the thriving vitality of the 5G market.
Through its own sales team, the Company vigorously promotes and publicizes its research and development results and technology display in 5G sales, actively participates in important seminars and business fairs around the country and deeply explores the target customers related to 5G news. Through painstaking efforts and keen business acumen, we have actually obtained a stable customer flow.
The Company’s top five customers for 5G AI multimodal digital business at this stage are Qingdao Ruizhi Yixing Information Technology Co., LTD., Shanghai Shixun Network Technology Co., LTD., Wuhan Xiaoming Technology Co., LTD., Xinyi Xinfanfa Information Technology Co., LTD., Nanjing Linghui Information Engineering Co., LTD. Through close business cooperation, the above customers have become stable and loyal partners of the Company and will work together in the future.
Since Q4 2023, the 5G Multimodal Communication business has demonstrated explosive growth, with Q2 2024 sales achieving a substantial improvement compared to the same period last year.
Cost of Revenues
For the year ended June 30, 2025, we recorded a cost of revenues of $69,172,872, compared to $23,501,762 for the same period in 2024, reflecting an increase of $45,671,110 or 194.3%. The cost of revenues for the year ended June 30, 2025, was primarily driven by 5G AI multimodal digital platform fees and cloud platform construction costs paid to suppliers. The increase in the cost of revenues was mainly due to the higher revenue generated from the 5G AI multimodal digital segment.
For the year ended June 30, 2025, the costs were as follows: $68.82 million for 5G AI multimodal digital, $316,415 for software sales, and $41,007 for the acoustic intelligence business. For the year ended June 30, 2024, the cost of 5G AI multimodal digital was $23.40 million, the cost of other services was $68,391, the cost of smart city was $30,928 and the cost of Acoustic Intelligence business was $2,345.
Gross Profit
Gross profit for the year ended June 30, 2025, was $2,443,948 compared to $474,105 for the year ended June 30, 2024, representing an increase of $1,969,843. This increase in gross profit was primarily driven by higher sales during the year ended June 30, 2025.
Gross margin was 3.4% for the year ended June 30, 2025, compared to 2.0% for the same period in 2024. The improvement in gross margin was primarily driven by the rapid growth of high-margin customized solution projects, along with the Company’s significant increase in market share and operating income. The growth in gross profit indicates that the Company has substantial development potential in its operations, including:
Improved Shareholder Returns: An increase in gross profit typically leads to higher net profit, which boosts dividend distribution and stock value for shareholders. This, in turn, enhances shareholder confidence and attracts more investors.
Consolidation of Market Position: A higher gross profit makes the Company more competitive, enabling it to attract more customers through price advantages, superior product quality, or service differentiation. This allows the Company to expand its market share and further strengthen its position in the market.
Innovation and R&D Investment: The increase in gross profit provides the Company with more resources for innovation and R&D. This supports the development of new products, improvements to existing offerings, and the ability to adapt to changing market demands, all of which contribute to maintaining technological leadership and sustainable growth.
Improving Business Model Integration and Market Channels:
Use Multiple Marketing Channels: By optimizing and integrating various marketing channels, the Company can reach a broader range of target customers, improve efficiency, meet customer needs, and reduce risks. This multi-channel strategy enhances the effectiveness of market coverage, positioning the Company for success in the competitive landscape.
Enhance Product Brand: Strengthening brand image is key to building customer loyalty and recognition. The Company should focus on designing a unique brand identity, unifying its image, and leveraging word-of-mouth marketing through social media to increase brand visibility and authority. Continuous maintenance of the brand’s image will improve product strength and creativity.
Improve Sales Personnel Effectiveness: Salespeople should be focused on achieving results, ensuring that every sales activity addresses customer pain points and drives conversions. A deep understanding of customer needs allows for tailored solutions, fostering trust and recognition. Salespeople should continuously enhance their communication and negotiation skills, undergo professional development, and adapt to market changes in order to provide the best possible customer service.
Foster Innovative Product Development and Production: To maintain competitiveness and achieve sustainable development, the Company should increase investment in R&D and deepen its understanding of market needs. Building a culture of innovation, encouraging employee creativity, and collaborating with universities and research institutions will drive progress.
By focusing on these areas, the Company can strengthen its position in the market, enhance its growth potential, and continue to deliver value to shareholders and customers alike.
Selling, General and Administrative, and Research and Development Expenses
Selling expenses for the year ended June 30, 2025 were $1,980,224, compared to $3,279,627 for the same period in 2024, reflecting a decrease of $1,299,403, or 39.6%. The decrease was mainly due to the decrease of advertising and marketing expenses by $1,431,505, which was partly offset by increased service fee by $37,037, increased payroll expense by $7,148, increased rent expense and property management fee by $43,255 and increased other selling expenses by $36,620.
Currently, we are focusing on expanding the Company’s leading acoustics high-tech technologies and products, while continuing to develop 5G-related applications. We incurred R&D expenses of $914,996 and $359,342 during the years ended June 30, 2025 and 2024, respectively, representing an increase of $555,654 or 154.6% as compared to the same period of 2024.
Research and development expenses for the year ended June 30, 2025, totaled $914,996. The Company’s research and development efforts have yielded several significant outcomes, including:
As one of the leading service providers in China’s 5G AI multimodal digital field, Datasea has developed a range of primary products and services targeting different customer needs. These include:
5G AI multimodal new media marketing service platform
5G AI multimodal Smart Agriculture (Digital Rural) Service Platform
5G AI multimodal platform for small and micro-enterprise services
5G AI multimodal traffic top-up platform These 5G AI multimodal digital business applications are designed for various industries in China, incorporating AI-driven payment system applications, big data analytics, and predictive models.
Datasea has completed a revolutionary upgrade of its core 5G multimodal communication business with AI processing technology. This upgrade enables the AI creation and generation of diverse forms of information, including sound, text, images, and videos. Additionally, it supports efficient transmission and AI-powered digital human marketing functions. This capability empowers numerous industries and clients by enhancing brand recognition, acquiring customers, promoting markets, and boosting revenue.
In the field of acoustic high-tech business, Datasea is one of the pioneers in introducing the concept of “acoustic effect” globally. The Company exports cutting-edge acoustic high-tech products and solutions worldwide. Combining basic acoustic theory with artificial intelligence, Datasea applies acoustic technology and the acoustic effect technical system to collect and process acoustic data. The Company utilizes non-audible mechanical wave effects to address various challenges. With world-leading acoustic equipment and algorithm models, Datasea’s acoustic technologies and products are widely used in sectors such as agriculture, industry, healthcare, and IoT technology. Notably, in the field of ultrasonic technology, the Company applies the effects of ultrasonic cavitation, thermal, and mechanical forces to meet diverse needs, including disinfection and sterilization, crop drying, safety monitoring, beauty and skincare, as well as medical health applications.
Datasea’s Acoustics and 5G intelligent products and solutions serve over 52 million businesses and households across China (with more than 99% being SMEs) by providing digital and intelligent services.
Market Promotion Team
The Company has collaborated with three influential Chinese market promotion enterprises, which leverage extensive market resources to recommend new clients for the Company and facilitate the signing of contracts with these new clients.
General and administration expenses decreased $4,257,080, or 47.5% from $8,960,523 during the year ended June 30, 2024, to $4,703,443 during the year ended June 30, 2025. The decrease was mainly due to decreased stock compensation expense by $5,050,544, decreased payroll expense by $203,752, decreased rent expense and property management fee by 121,817, decreased auto expense by $17,156, which was partly offset by increased professional service fee by $820,159, and increased trademark registration fee by $316,229.
We are treating human capital as a key indicator to drive business growth and technical innovation, also pursuing better integrated channels with related industries.
Non-Operating Income (Expenses), net
Non-operating income was $75,185 for the year ended June 30, 2025, consisting mainly of interest income of $5,016 and other income of $70,169. Non-operating expenses were $95,918 for the year ended June 30, 2024, consisting mainly of interest income of $1,975 and other expenses of $97,893.
Net (Income) Loss from Discontinued Operation
We generated net income from discontinued operation of $833,546 (which was the gain on disposal of Zhangxun) for the year ended June 30, 2024.
Net Loss from continuing operation
We generated net loss from continuing operation of $5,085,694 and $12,210,610 for the years ended June 30, 2025, and 2024, respectively, a $7,124,916 or 58.4% decrease by comparing with the same period of 2024. The decrease in net loss was mainly due to increase in gross profit and decrease of operating expenses as explained above.
Accounts receivable
The operating revenue of the year ended June 30, 2025, was $71,616,820, the balance of accounts receivable was $1,374,180 at June 30, 2025. In the same period last year, the operating revenue was $23,975,867, and the accounts receivable balance was $718,546 at June 30, 2024. This quarter, the Company further segmented the market, planned eight regional headquarters, strengthened the collection control, and promoted the fund collection of contracted delivery projects, which led to the benign return of funds and had a far-reaching impact on the future.
Liquidity and Capital Resources
Historically, we have funded our operations primarily through the sale of our common stock and shareholder loans. To strengthen our ability to continue operating as a going concern, we are focusing on generating recurring revenues and sustainable operating cash flows.
We expect to generate revenue through expanding our current 5G AI multimodal digital business and acoustic intelligence business, along with continuous product innovation and development as well as various types of value-added services. To maintain sufficient working capital to support our operations and finance the future growth, we anticipate addressing any cash flow shortfall through financial support from our majority stockholders (who are also our board members or officers) and issuing securities public or private issuance of securities. However, such additional financial resources may not be available to us on favorable terms, or at all, if and when needed.
As of June 30, 2025, we had a working capital deficit of $704,978 or a current ratio of 0.81:1, and current assets in the amount of $2,922,272. As of June 30, 2024, our working capital deficit was $952,090, with a current ratio of 0.74:1, and current assets were $2,647,892.
We expect the Company to continue supporting its ongoing operations and financing through revenue growth and increased financing activities.
On October 3, 2024, Datasea entered into subscription agreements, with three non-U.S. investors, including Zhixin Liu, the Company’s Chairwoman of the Board, Chief Executive Officer, President and Secretary, and Fu Liu, a Director of the Company, pursuant to which the Company sold to investors an aggregate of 1,932,224 shares (of the Company’s Common Stock at the purchase price of approximately $4.0 million. The Company’s used net proceeds from the sale of these shares for investments in acoustic high-tech related products design upgrade, working capital for mass production and on-line sales, acquiring intellectual property, and working capital for the promotion and sales of AI multimodal digital business products.
However, there is no assurance that the Company will be able to secure additional working capital on commercially viable terms, or at all.
The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended June 30, 2025 and 2024, respectively.
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Cash Flow from Operating Activities
Net cash used in operating activities was $2,374,680 during the year ended June 30, 2025, compared to net cash used in operating activities of $6,398,883 during the year ended June 30, 2024, a decrease in cash outflow of $4,024,203.
The decrease in cash outflow was mainly due to (1) decreased cash outflow on prepaid expenses and other current assets by $1.69 million, (2) increased payment received from customers for unearned revenue by $573,635, and (3) decreased net loss by $6.30 million, with non-cash adjustments to net loss including gain on disposal of subsidiary by $833,546, depreciation and amortization by $644,784, loan forgiveness by shareholder by $105,356, and decreased stock compensation expense by $4,856,484, despite we had increased cash outflow on accounts payable by $1.25 million.
Cash Flow from Investing Activities
Net cash used in investing activities totaled $4.09 million for the year ended June 30, 2025, which consisted of cash paid for the acquisition of office furniture and equipment of $8,129 and cash paid for acquisition of intangible assets by $4.08 million. Net cash used in investing activities totaled $167,957 for the year ended June 30, 2024, which consisted of cash paid for the acquisition of office furniture and equipment of $6,868, cash paid for acquisition of intangible assets by $161,054, and cash loss due to disposal of subsidiary of $35.
Cash Flow from Financing Activities
Net cash provided by financing activities was $6,945,370 during the year ended June 30, 2025, which was net proceeds from sale of our common stock through an equity financing of $5,939,133, and proceeds from loan payables of $2,374,350, which was partly offset by repayment of loan payables of $1,164,895, and repayment to related parties of $203,218. Net cash provided by financing activities was $6,839,577 during the year ended June 30, 2024, which was the net proceeds from due to related parties of $360,804 and net proceeds from sale of our common stock through an equity financing of $8,061,286, which was partly offset by repayment of loan payables of $1,582,513.
Loan from banks
On April 10, 2024, Guozhong Times entered a loan agreement with Bank of Beijing for the amount of RMB 500,000 ($70,158) with a term of 12 months with a preferential annual interest rate of 3.45% to be paid every 21 st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $1,954 and $396 interest expense for this loan. On April 9, 2025, the loan was paid in full.
On April 23, 2024, Guozhong Times entered a loan agreement with Beijing Rural Commercial Bank Economic and Technological Development Zone Branch for the amount of RMB 550,000 ($77,173) with a term of 12 months with the annual interest rate of 4.95% to be paid every 21 st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $3,808 and $626 interest expense for this loan. On April 23, 2025, the loan was paid in full.
On April 25, 2024, Shuhai Beijing entered a loan agreement with Industrial Bank Co., Ltd for the amount of RMB 2,000,000 ($280,631) with a term of 12 months with a preferential annual interest rate of 3.88% to be paid every 21st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $9,243 and $1,722 interest expense for this loan. On April 24, 2025, the loan was paid in full.
On May 28, 2024, Guozhong Times entered a loan agreement with China Everbright Bank for the amount of RMB 1,000,000 ($140,315) with a term of 12 months with the annual interest rate of 3.4% to be paid every 21 st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $3,909 and $318 interest expense for this loan. On May 27, 2025, the loan was paid in full.
On June 20, 2024, Shuhai Beijing entered a loan agreement with Bank of China for the amount of RMB 4,000,000 ($561,262) with a term of 12 months with a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. On June 19, 2025, the loan was paid in full. For the year ended June 30, 2025, the Company recorded and paid $9,744 and $nil interest expense for these two credit lines.
On March 31, 2025, Shuhai Beijing entered a credit line agreement with Bank of China for the amount of RMB 6,000,000 ($835,864) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. For the year ended June 30, 2025, the Company recorded and paid $7,558 interest expense for this loan. As of June 30, 2025, $838,155 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.
On May 20, 2025, Guozhong Times entered a credit line agreement with Beijing Bank for the amount of RMB 3,000,000 ($419,076) with a term of 12 months, the credit line has a fixed annual interest rate of 3.00% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $803 interest expense for this loan. As of June 30, 2025, $419,076 was recorded as current liabilities.
On May 21, 2025, Guozhong Times entered a loan agreement with Beijing Rural Commercial Bank Economic and Technological Development Zone Branch for the amount of RMB 1,000,000 ($139,692) with a term of 12 months with a fixed annual interest rate of 4.95% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $576 interest expense for this loan. As of June 30, 2025, $139,692 was recorded as current liabilities. Liu Zhixin is the guarantor of this loan agreement.
On June 6, 2025, Shuhai Beijing entered a credit line agreement with Bank of China for the amount of RMB 1,500,000 ($210,500) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. On June 11, 2025, Shuhai Beijing entered another credit line agreement with Bank of China for the amount of RMB 2,500,000 ($350,800) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. As of June 30, 2025, $558,768 was recorded as current liabilities. Liu Fu is the guarantor of these two credit lines.
On June 6, 2025, Shuhai Beijing entered a credit line agreement with Beijing Bank for the amount of RMB 3,000,000 ($419,076) with a term of 12 months, the credit line has a fixed annual interest rate of 2.70% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $314 interest expense for this loan. As of June 30, 2025, $419,076 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.
Financial index analysis
Analysis of financial index
For the years ended June 30, 2025, and 2024, revenue was $71,616,820 and $23,975,867, respectively. Operating income increased by $47,640,953 over the same period of last year, an increase of 198.70% over the same period of last year, the main reason for the substantial growth is that the company locates currently in the 5G AI multi-model R&D technology which belongs to the industry leader, after long-term expansion of customer groups, the company has formed a stable customer group. This is closely related to the company’s technological research and development achievements over the years, personnel support, market promotion, the company’s upstream and downstream chain opening up, customer maintenance and technical experience accumulation, and eventually form a huge loyal customer base, but also closely related to the thriving vitality of the 5G AI multi-model business market.The company’s acoustic high-tech business segment has made significant progress and breakthroughs compared to the last fiscal year. Including the sales of acoustic high-tech products and the provision of acoustic high-tech solution services.
For the years ended June 30, 2025 and 2024, the Company’s gross profit was $2,443,948 and $ 474,105, respectively. Gross profit increased by $1,969,843 from the same period last year, an increase of 415.49% from the same period last year, and the current period increased market share and revenue significantly, so the gross margin increased simultaneously. The increase in gross profit margin means that the company’s development and operation has great potential ability. The reasons for the increase in gross profit are analyzed as follows:
The business structure has been optimized, and the proportion of high-margin businesses has increased. For instance, the revenue of high-margin acoustic intelligent products has seen a significant rise compared to the previous year. The execution of 5G AI multimodal technology solution contracts has also provided support for the increase in gross profit margin.
Effective cost control leads to product differentiation. Continuous research and development innovation can launch products with unique functions and advantages, thereby supporting higher pricing and increasing gross profit.
Due to market factors, the market share of 5G AI multimodal traffic business has expanded. The company has gained an advantage in market competition. With an expanded market share, it will have stronger pricing power and thereby increase gross profit.
For the years ending June 30, 2025 and June 30, 2024, the operating expenses were $7,598,663 and $12,599,492 respectively. The operating expenses decreased by $5,000,829, representing a 39.69% reduction compared to the same period last year.
Research and development investment has continued to increase, but overall operating expenses have shown a downward trend. The reduction in operating expenses reflects the overall effect of an enterprise in improving input-output efficiency and streamlining and compressing management expenses. This is not only an optimization of financial data, but also a concentrated manifestation of the enterprise’s outstanding operational level, profound management ability and forward-looking strategic vision. This move will drive enterprises into a new development pattern with stronger risk resistance, higher business agility and more aggressive market competitiveness, thus laying a solid foundation for sustained growth and long-term success.
As of June 30, 2025 and 2024, the Company’s cash balance was $$620,807 and $181,262, respectively, an increase of $ 439,545, or 242.49%, from the beginning of the period. The main reason is that the company successfully obtained financing during this period, absorbed social funds, expanded the scale of the company, enhanced the visibility of the company, enhanced the competitiveness of the company, provided strong financial support for the company’s business expansion and projects, and used for technology research and development, market expansion, corporate brand building, etc., laying a solid foundation for the sustainable development of the company.
The increased demand for products and services brought about by the company’s increased sales revenue and the expansion of financing channels brought about by a number of capital inflows, the company to optimize the asset structure, enhance the corporate capital capacity and liquidity.
For the years ending June 30, 2025 and June 30, 2024, the inventories were $206,610 and $153,583 respectively. The inventory increased by $53,027, representing a 34.53% increase compared to the same period last year.
The two major innovative projects of the company, “Hygiene-Busting Deodorizing Powder for the Bathroom” and “Sleeping Aid”, have successfully completed their research and development and have been officially transformed into mass-produced products - “Sound Wave Deodorizing and Cleaning Guardian SHTR-T01” and “Non-contact Sleep Aid XM-S01”. This increase in inventory is a strategic stock preparation carried out to seize the market opportunity, marking the establishment of a new growth channel for the company and laying a solid foundation for the strong growth of future performance.
For the years ending June 30, 2025 and June 30, 2024, the intangible assets were $3,495,984 and $546,001 respectively. The intangible assets increased by $2,949,983, representing a 540.29% increase compared to the same period last year.
Increasing the proportion of intangible assets indicates that the company is undergoing a strategic transformation towards a “light-asset, high-value” model. Through external acquisition, enterprises can quickly obtain mature technologies and resources, respond promptly to market changes, seize the initiative, and efficiently expand new fields, new markets or new product lines with such assets. While actively laying out external resources, the company still insists on internal research and development, maintaining a continuous and organic innovation capability, which lays a solid foundation for its long-term stable development.
As of June 30, 2025 and 2024, the capital reserve balance was $47,331,510 and $38,957,780, respectively, an increase of $ 8,373,730 from the beginning of the period or 21.49% from the beginning of the period, primarily due to an increase in the Company’s share issuance. The increase of capital reserve means that the enterprise has obtained additional capital, which can improve the overall capital strength of the enterprise, so that the enterprise has more funds at its disposal in the operation process. With the increase of capital reserve, the capital adequacy ratio of enterprises has been improved, thus enhancing the financial stability of enterprises and the ability to resist risks. In the face of market fluctuations and uncertainties, enterprises can be more confident to deal with challenges. An increase in capital reserves also increases net asset value per share and is a positive financial indicator for shareholders. This helps to enhance the investment confidence of shareholders and the market value of enterprises.
For the years ending June 30, 2025 and June 30, 2024, the outstanding bank loans were $2,374,767 and $1,170,298 respectively. The amount increased by $1,204,469.00, representing a 102.92% increase compared to the same period last year. The increase in the bank’s short-term loan directly reflects the company’s excellent credit standing, healthy financial performance, and stable debt repayment capacity. This move not only enhances our financial liquidity, providing a solid guarantee for seizing market opportunities, but also indicates that the bank holds a highly optimistic attitude towards our future development prospects, heralding a more stable bank-enterprise partnership.
For the years ending June 30, 2025 and June 30, 2024, the gross profit margins were 3.41% and 1.98% respectively. The overall gross profit margin of the company has significantly improved. This positive change is mainly attributed to the company’s proactive and successful product structure optimization strategy, which strategically increased the sales proportion of high-margin products. The core driving factors come from two innovative product lines: acoustic intelligent products and 5G-AI multi-modal technology solutions. This financial result not only proves the correctness of the company’s strategic decisions, but also clearly reflects that our product innovation has been recognized by the market, and the enterprise is steadily developing in the direction of high quality and high efficiency.
For the years ending June 30, 2025 and June 30, 2024, the company’s losses were $5,085,694 and $11,377,064 respectively. The company’s losses have significantly decreased, and its business situation has shown a stable and recovering trend. This indicates that the strategic adjustments, cost control, and business optimization measures implemented by the company have begun to yield results, and they have started to achieve substantial revenue generation. This positive change marks that the company’s operations have gradually returned to normal, laying a solid foundation for our anticipation of future profit prospects. The company’s future development is promising.
Management’s Expectations and Strategic Priorities for the Next Fiscal Year
Building on the significant achievements of fiscal year 2025, Datasea is at a pivotal stage of transformation. Going forward, the Company will continue to deepen its presence in acoustic high-tech and AI multimodal digitalization , leveraging ongoing innovation and market expansion to further strengthen its leadership position globally. The strategic priorities for the next fiscal year will focus on the following areas:
Increased R&D Investment and Technological Innovation
Datasea will continue to increase investment in R&D, particularly in the integration of acoustic technologies with AI . Breakthroughs in ultrasound, infrasound, and neuro-regulation technologies will be core drivers of future development. The Company aims to accelerate the deep integration of low-intensity focused ultrasound (tFUS) with AI algorithms, expanding its applications in healthcare, smart industry, and agriculture .
At the same time, the AI multimodal digital platform will further enhance cross-industry capabilities, particularly in data processing, speech recognition, image analysis, and intelligent prediction . Datasea plans to optimize existing algorithms while exploring emerging technologies such as deep learning and big data analytics to improve intelligence levels and provide highly customized solutions across industries.
Accelerated Market Expansion and Internationalization
The Company will continue to strengthen its penetration in the domestic market while accelerating international expansion. In overseas markets, particularly in the U.S. and Europe, Datasea will pursue partnerships with local enterprises and introduce localized products to increase market share. The Company has already achieved initial success in the U.S., where through Datasea Acoustics LLC and local partners.
In China, Datasea will further expand its presence in healthcare, beauty, and environmental protection through a dual approach combining e-commerce platforms and offline stores. Meanwhile, solution-based services will help consolidate its B2B client base.
M&A and Strategic Partnerships to Enhance the Industrial Chain
Datasea will actively pursue international M&A opportunities, particularly in the acoustics sector, to strengthen capabilities in core technology modules, sensor technologies, and patent portfolios. The Company also plans to acquire businesses with advantages in AI and big data processing to reinforce its multimodal platform’s algorithm and industry data resources. Furthermore, acquisitions in smart manufacturing and precision agriculture will support cross-industry integration of acoustic technologies.
To expand its technological and market advantages, the Company will deepen cooperation with global research institutions, accelerate industrialization of new technologies, and pursue strategic investments to secure both technological leadership and market growth.
Product Mix Optimization and Margin Enhancement
Datasea will continue to optimize its product mix by increasing the proportion of high-margin offerings, such as acoustic health devices and customized AI solutions. In fiscal year 2025, the Company achieved a notable improvement in gross margin, and further expansion is expected in fiscal year 2026 as integrated solutions scale and technological barriers strengthen.
At the same time, the Company is transitioning its acoustic high-tech business from stand-alone hardware sales to integrated “hardware + AI platform” solutions, providing end-to-end services from R&D to implementation. This approach is expected to expand market share and enhance profitability through differentiated technologies and value-added services.
Company Outlook and Market Trends
Global and Regional Market Trends
With rapid global advances in technology and the economy, particularly the acceleration of digital transformation and intelligent upgrades, the coming years are expected to see sustained leadership by acoustic and AI technologies. Widespread adoption of digital and intelligent solutions will drive innovation and upgrades across industries. Based on industry research and market feedback, the fusion of acoustics and AI will create opportunities in the following areas:
Healthcare : With rising demand for health management, particularly due to aging populations, minimally invasive and precision healthcare solutions will become mainstream. The non-invasive advantages of acoustic technologies, combined with AI-driven analytics, will drive adoption of acoustic medical devices such as tFUS in neuro-regulation, tumor treatment, and rehabilitation medicine .
Smart Manufacturing : As Industry 4.0 continues to reshape production processes, applications of acoustic devices and AI in equipment monitoring, fault prediction, and process optimization will expand. Datasea plans to further combine acoustics with ultrasonics and nanomaterials to meet demands for high-precision, high-efficiency manufacturing.
Smart Agriculture : With accelerated modernization, precision and green agriculture are becoming global trends. Acoustic technologies applied to pest detection, crop growth stimulation, and product preservation will offer more intelligent and environmentally friendly solutions for agriculture.
Consumer Upgrading : Rising consumer demand for health, environmental protection, and personalization will increase the share of acoustic products such as sleep aids and air purifiers in households. The dual approach of e-commerce and offline retail—especially the growth of live-streaming sales—will accelerate the expansion of consumer markets.
Global Market Integration : With growing global emphasis on digitalization and green technologies, international demand for intelligent products will expand. Datasea will continue to scale its overseas presence, particularly in Europe and Asia-Pacific, to support global market integration.
Industry Development and Technological Evolution
Over the next few years, acoustic and AI technologies will continue to merge, driving breakthrough developments across industries. Key directions include:
Cross-Disciplinary Integration : Deep fusion of acoustics and AI will drive innovation in healthcare, industry, and agriculture. Datasea will focus on R&D in areas such as neuro-regulation, brain-computer interfaces, and ultrasonic precision machining, promoting commercialization of new technologies.
Intelligent Upgrades : With advances in big data and cloud computing, acoustic and AI platforms will evolve toward intelligent management and services. Multimodal data fusion and real-time processing will enable full-process automation and industry-wide applications.
Green and Sustainable Technologies : Global emphasis on sustainability will drive acoustic applications in environmental governance and green agriculture. Datasea will continue to expand in areas such as ultrasonic sterilization, pesticide reduction, and energy savings, offering environmentally friendly solutions.
Key objectives for the coming years include:
Continuous Technological Innovation : Strengthen R&D to deepen integration of acoustics and AI, targeting breakthroughs in minimally invasive healthcare, smart manufacturing, and smart agriculture.
Global Expansion : Scale international markets in the next three to five years, focusing on North America, Europe, and Asia-Pacific. Growth will be supported through acquisitions, channel partnerships, and localized market strategies.
High-Quality Growth : Optimize product mix to increase the proportion of high-margin products, enhance profitability through customized solutions and high-value-added services, and complete the transition from “scale expansion” to high-quality growth.
Social Responsibility and Sustainability : Continue adhering to the principle of “innovation-driven, green development,” actively promoting environmentally friendly technologies and products, and contributing to global sustainability.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe that the critical accounting policies as disclosed in this report reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.
The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:
Critical Accounting Estimates
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. These estimates and judgments include, but are not limited to, revenue recognition, sales return allowance, the allowance for bad debt, valuation allowance of deferred tax assets, income taxes, the useful lives of long-lived assets and assumptions used in assessing impairment of long-lived assets. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual amounts may differ from the estimated amounts, such differences are not likely to be material.
Critical Accounting Policies
Accounts Receivable, Net
On May 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Accounting Standards Codification (“ASC”) 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not they will be required to sell.
The Company adopted ASC 326 and all related subsequent amendments thereto effective July 1, 2023, using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The was no transition adjustment of the adoption of CECL.
Accounts receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the historical carrying amount net of allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including historical losses, the age of the receivable balance, the customer’s historical payment patterns, its current credit-worthiness and financial condition, and current market conditions and economic trends. Accounts are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of June 30, 2025 and 2024, the Company had a $0 bad debt allowance for credit losses.
Inventories, Net
Inventory is comprised principally of intelligent temperature measurement face recognition terminal and identity information recognition products, and is valued at the lower of cost or net realizable value. The value of inventory is determined using the first-in, first-out method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported net of such allowances. There were $152,907 and $53,650 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of June 30, 2025 and 2024, respectively.
Revenue Recognition
The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).
The core principle underlying FASB ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are identified when possession of goods and services is transferred to a customer.
FASB ASC Topic 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.
The Company derives its revenues from product sales, software sales, and 5G messaging service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via product sale contracts and professional service contracts, with performance obligations identified. The transaction price, such as product selling price, and the service price to the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after each performance obligation is satisfied. Revenue is recognized net of returns and value-added tax charged to customers
Recently Issued Accounting Pronouncements
In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024 03”) to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1.Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Date (“ASU 2025-01”). The amendments, as clarified by ASU 2025-01, are for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact that ASU 2024-03 will have on its consolidated financial statements and related disclosures.
In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2025-01 will have on its consolidated financial statement presentation or disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of comprehensive income and cash flows.
